Auditrix’s Techdirt Comments

Don't have time to reply to all of your comments, but just saw David Israelite speak today and he made some really cogent points about the intent of the rates. I don't want to put words in his mouth, but one takeaway for me was that record labels can license their content at market rates but publishers are limited to maximum mechanical rates set by the CRB (and since PROs are subject to consent decrees, the result is that they are not collecting much or anything from many music services). What this means is that record labels are able to collect 8 or 9 times as much as publishers, in many cases (even though in a free market it would likely be closer to 50%/50%). One good thing about the flexible rates for new services is to provide that if the record companies do well and negotiate higher rates, the publishers get more as well, and either way, the publisher's share is a bit better than for physical products and permanent downloads (i.e., for the new services the record companies may collect only 4-6 times as much as publishers instead of 8 or 9 times as much as publishers).

I think you might be a little overly conspiratorialist regarding whether the NMPA is operating in the best interest of publishers collectively and especially with respect to the definitions of the various types of services, but I haven't had time to finalize my own analysis of the deal, so I will keep an open mind.

Wish I had more time to comment on your other points, but I have to get back to auditing royalties!

I am biased because our firm's audit report is the basis for this suit, but I am disappointed that other auditors failed to try to secure full YouTube compensation for their clients.

The labels pursued a similar strategy with record clubs when record clubs mattered, so this is nothing new.

Now that several litigators have approached me who are interested in exploring a class action against the labels re: YouTube, it is too late. (Most artists have lost their rights to object to 2006 accountings.)

However, the music companies do have equity interests in certain music services, so you may yet read about similar claims.

Re: Re: Reason for existance

Reason for existance

This is why royalty auditors exist. And, BTW, it doesn't solely apply to the major labels (indies are often worse) or even the music industry. Pretty much any industry in which compensation is contingent on certain factors is an industry where you need to audit to get a fair share or something close to it.

It is true that cases like this are not always but often cases of unrecouped accounts. I have had hundreds of artists contact me under similar circumstances and I can't help most of them because they will never recoup. The cases where the accounts are recouped or will recoup and there is an active product with material sales are much less common, but those are the people who are due something worth pursuing.

Of course, when products earn more money, the companies are more willing to spend time to resolve these disputes. It just isn't worth it for them to invest the time to account to a payee that isn't earning the company any money, which is why a lot of contracts stipulate that no accounting is required if earnings do not reach a certain threshold. So, just because a record company doesn't account to an artist does not mean that there is a pot of gold at stake. It is more likely closer to $50, which is why it often does not make sense to pursue such matters by hiring an auditor and/or an attorney.

So, while I know better than anyone about the inaccuracies and failures of royalty accountings, I also think artists waste energy fretting about not receiving royalties for a product that is not selling. Right or wrong, these folks are better served by going out and making a better product.

However, if your product is selling well and you haven't received an accounting, it may make sense to shake the tree. One way auditors can help is simply to advise how much tree shaking may be worthwhile. Mr. Ridder could have hired an auditor to spend a couple hours to help figure that out, but I suppose he didn't want to spend the money.

Re: Re: Re: Commercial vs. non-commercial

Hi Karl,

I thought you would be interested in this information:

Artists may earn as much as writers (50%) in connection with synch license fees, so artists have a lot to lose as well as composers.

Also, most composers of works for hire continue to collect writer performance license royalties, and often other writer royalties or bonuses, even if they are paid an up-front flat fee. If there were "plenty of composers" willing to work without contingent compensation, there would be little demand from composers for my services. Also, up front fees would be higher.

Re: Sita didn't cite her costs

Sita didn't cite her costs

The figures cited by Sita were unlabeled. Are they revenues or profit?

Most importantly, Sita didn't cite her costs. Unlike most film profit accountings, Sita's totaled one year. You can only determine project profitability with an inception-to-date accounting. Not to mention, if you included the prior period, there may be a lot more costs!

Re: Re: Huh?

You're right, I had the G1 and it was the first phone with Android, and there were a few after that before the Nexus One. But the Nexus One was the first with Froyo, the modern Android operating system that is now being rolled out on other phones.

Re: Re: Sounds like a great idea... for elite music fans and musicians who want to be pimped out to the highest bidder

Sounds like a great idea... for elite music fans and musicians who want to be pimped out to the highest bidder

In the '90s, when I had a Diamond Rio (lol!), I was convinced that recorded music was on its way to becoming free through the celestial jukebox, and that the much older system of patrons supporting musicians would once again become conventional.

Maybe I don't need to go into this much detail, but I thought this because, as we duplicate and share files, the less valuable those files become, but what will increase in value is whatever remains that is scarce: The genuine experiences of being part of a live concert, meeting your rock idol (or whoever you are a fan of) and all the sex, drugs and other experiences that go along with it. For this, I thought people would be willing to pay a premium and we would continue to have a music industry, but one that was elitist because it would generate more revenues from private performances for rich people than from data files that would be freely supplied to the public.

However, the past 15 or 20 years have not unfolded quite as I predicted. I am still waiting for the celestial jukebox and, despite unprecedented consolidation of concert promoters and 360-deals in which labels have a greater interest in supporting artist tours, the live concert industry outlook has never looked worse in my life.

Further, when I hear of news items like this, I know it can't work. I know this because I know brilliant musicians and few brilliant musicians can be expected to do more than be brilliant and musical.

Sending brilliant artists on a path without a record label to support them results in almost zero chance of breaking through, and sending them to spend intimate time with their fans for 1 week, as in this case, is like asking them to become a prostitute as well as a musician.

Maybe there are a few brilliant musicians who can do it all, but I think we need to recognize the value of brilliant music and pay our brilliant musicians to make brilliant music and not pimp them out to the highest bidding Hawaiian vacationer.